Indians Are Borrowing More. At What Cost?

India’s Borrowing Boom Is Weakening The Household Safety Net

By Katya Naidu

What?

Indian households seem to be saving less while spending more — and increasingly by borrowing.

Combined with slowing salary growth and shrinking real incomes, this could pose a challenge in the years to come.

The latest Financial Stability Report shows that the Indian household debt-to-GDP ratio is at 45.5%, a historic high — a level it has reached after steadily trending upward. And 58.4% of total borrowings as of March 2026 were non-housing retail loans, indicating a disproportionate share of consumption loans.

Consumption-related loans remained the primary driver of household borrowings.

Ponmudi R, CEO of Enrich Money, said that a wide range of borrowing products — including personal loans, credit cards, vehicle financing and digital lending — have expanded rapidly in recent years.

He cautioned that if such borrowing is increasingly used to fund consumption like lifestyle spending, travel, gadgets and daily expenses rather than income-generating or wealth-building assets, it could raise concerns about household financial health. “Consumption creates short-term economic growth, but it does not necessarily improve a family's balance sheet,” he said.

Why It Matters

While most borrowers are not in the red, a key factor that could alter the health of a rising loan book is compensation. Since consumption-related loans are not necessarily income-generating, the ability to service a loan directly depends on salary growth.

As of now, the numbers are not encouraging — in fact, salary growth has been moderating.

E&Y’s Future of Pay 2026 report said that actual salary increment in 2024 was at 9.6%, which went down to 9.3% in 2025 and is projected at 9.1% in 2026.

Across the 16 sectors covered, 15 are projected to see lower percentage salary increments, with GCC employees the only exception.

Dhananjay Sinha, CEO and co-head of institutional equities at Systematix Group, said that many corporate non-finance sectors were seeing a slowdown in sales and margin erosion, and going in for ‘economisation of compensation’.

“Sectors like FMCG, IT and banking sectors are rationalising the workforce, using technology and automation to optimise spending on compensation. Rural wage growth is modest too, and adds to the risk in the urban formal sector. It could result in a reduction in repayment capacity,” he said.

Another factor that can lead to debt stress is interest rates. The current RBI governor, Sanjay Malhiotra, has reduced interest rates five times in 2025, effectively reducing the repo rate to 5.25% from 6.5%.

Yet, interest rate transmission works differently in India than in other countries. Indian households’ rising debt could impact the nation’s wellbeing as well. While other countries can handle higher household debt-to-GDP ratios, India must keep it benign, suggest experts.

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Rs 138 lakh crore

That's the combined value of India's 300 most valuable family businesses, equivalent to the 18th largest economy in the world, ahead of the Netherlands, Saudi Arabia, Switzerland and Poland, according to the 2026 Barclays Private Clients Hurun India Most Valuable Family Businesses List.

By the Numbers: The 300 families added nearly Rs 30 lakh crore in value since the 2024 edition, a rise of 27.5%, even as the Nifty 50 fell 1.1% and the Sensex declined 3.7% over the same period.

The Ambani family tops the list for the third consecutive year at Rs 25.82 lakh crore, despite an 8.5% fall in value.

The Kumar Mangalam Birla family is second at Rs 8.14 lakh crore, up 26%, and the Jindal family third at Rs 8.02 lakh crore, up 40%. The top 10 families account for 51% of the list's total value, while 230 families are now worth $1 billion or more, 48% higher than last year.

Future: First-generation businesses are growing faster than established family conglomerates. The 100 first-generation families tracked separately have a combined value of Rs 77.8 lakh crore, led by the Adani family at Rs 19.6 lakh crore.

Together, the 400 families across both lists account for Rs 215.8 lakh crore in value.

India's family wealth is becoming more institutionalised, with 79 of the top 300 families now operating family offices, and 71 companies on the list led by professional CEOs, nine more than last year, signalling a gradual shift towards separating ownership from management.

Air India Pilot Fails Drug Retest

The captain of an Air India flight that suddenly dropped about 300 feet last week has tested positive for illegal drugs in a second, confirmatory screening, Bloomberg reported, citing sources. The August 4 incident on flight AI 2379, from Phuket to Delhi, left 20 passengers and four cabin crew injured. The Airbus A320, carrying 137 passengers and eight crew, is being probed by India's Aircraft Accidents Investigation Bureau, with France's BEA and Airbus assisting.

Critical Moment: India's civil aviation minister has summoned Air India CEO Campbell Wilson over the incident, Reuters reported, citing a source.

The incident adds pressure on the Tata-owned airline, still recovering from last year's fatal 787 crash and a record annual loss, as incoming CEO Tewolde Gebremariam prepares to take charge.

Setup: Under aviation regulator rules, a second positive drug test triggers a three-year suspension of the pilot's license and a third leads to permanent cancellation.

CEO Exits Godrej Consumer Products

Godrej Consumer Products has appointed its current CFO Aasif Malbari as managing director and CEO with immediate effect, after Sudhir Sitapati resigned just months after being reappointed for a second term, the company said in a BSE exchange letter.

Fast Facts: Sitapati tendered his resignation on August 10, with effect from August 11, saying, "I feel that the task I had set for myself here is done and this is the right time to move on."

Malbari, who has three decades of experience in FMCG and automobiles and previously led GCPL's Africa business transformation, will serve a five-year term. Vishal Kedia was named interim CFO.

GCPL shares ended 0.8% lower on the day. The company last week reported an 11.5% rise in quarterly profit, supported by steady demand and strong volume growth.

The Shift: The leadership change is abrupt — in May, GCPL had reappointed Sitapati as MD and CEO for a second five-year term starting October 18, 2026.

Sitapati, who joined GCPL in October 2021 from Hindustan Unilever, where he spent over 22 years, noted that from May 2021 to August 2026, GCPL's total shareholder return was around 10% on a monthly average, compared with about 8% for the Nifty FMCG index.

India’s Food Buffer

India’s foodgrain stocks could provide a buffer against a potentially severe El Niño, even as the weather phenomenon threatens crop yields across Asia. Sowing in India has broadly recovered from an initial delay, but rainfall in August and September will be crucial for crop maturity and grain formation, Ashwini Bansod, vice president for commodities research at Phillip Capital India, told Reuters.

Context: India, the world’s largest rice exporter, accounts for about 40% of global rice exports and holds enough rice to fill warehouses with stocks equivalent to more than a year of global exports. El Niño, a weather phenomenon marked by unusually warm Pacific Ocean temperatures, is intensifying this year, bringing hotter and drier conditions in some regions and disrupting rainfall patterns. Forecasters expect it to strengthen through October.

Pivot: This rice surplus could help cushion any disruption to production from weaker monsoon rains. China also holds nearly half of the world’s wheat stocks. Those reserves could reduce its need for imports if drought hits Australia, a key wheat supplier.

Tighter Energy Norms Hit Urea Profits

Legacy urea plants are set for a structural reset in profitability following tighter energy-efficiency norms announced on July 30. These norms prescribe the amount of energy (measured in Gcal per tonne) plants can use to produce urea, with subsidy support linked to how efficiently they perform against this benchmark. Crisil Ratings expects profitability to fall by around 25%, from about Rs 1,700 to Rs 1,250 per tonne, with the sharpest impact on plants most reliant on legacy operations and earlier efficiency-linked savings.

Context: Legacy plants, which make up 74% of India's urea capacity, depend heavily on subsidies tied to energy norms last tightened in 2018 and 2020. The composite norm has now been cut to 5.67 Gcal per tonne from April 2025, narrowing efficiency gains that previously added nearly Rs 1,300 per tonne to earnings.

The Lead: Crisil said rated manufacturers should absorb the hit without major credit stress, aided by diversified earnings from complex fertilisers and crop-protection chemicals, alongside controlled leverage.

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Markets Wilt As All Signs Point To A Forever War In West Asia

On Episode 945 of The Core Report, financial journalist Govindraj Ethiraj talks to Sheetal Sapale, Vice President–Commercial at Pharmarack as well as Gautam Shahi, Senior Director at Crisil Ratings.

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